MODULE 3

GLOBALISATION
1. Meaning of Globalization
Globalization refers to the process of increasing
interconnectedness and interdependence among countries
through the flow of goods, services, capital, technology,
ideas, information, and people.
It leads to a borderless world economy, where domestic and
international markets are integrated.
Definitions:
IMF: Globalization is the growing economic interdependence
of countries worldwide through increasing volume and
variety of cross-border transactions.
World Bank: Integration of economies and societies through
flows of information, ideas, technologies, goods, services,
capital, finance, and people.
 2. Features of Globalization

 Liberalization of Trade:
 Reduction of trade barriers such as tariffs, quotas, and duties.
 Example: India’s liberalization reforms of 1991 opened up the economy to
foreign trade.
 Integration of Economies:
 National economies become part of a single global economy.
 Example: Apple designs its products in the US, manufactures in China, and
sells globally.
 Free Flow of Capital:
 Ease of movement of financial investments across countries.
 Example: Foreign Direct Investment (FDI) by Amazon in India.
 Technological Advancement:
 Faster communication and production due to technology sharing.
 Example: Use of AI tools in global customer service by companies like
Google.
 Global Workforce and Migration:
Professionals move across countries for employment.
Example: Indian software engineers working in the USA.
 Multinational Corporations (MNCs):
Companies operate in more than one country.
Example: McDonald’s has outlets in more than 100 countries.
 Cultural Exchange:
Blending of cultures across borders.
Example: Korean K-pop and Bollywood popularity outside
native countries.
 Outsourcing and Offshoring:
Shifting operations to countries with cost advantages.
Example: American companies outsourcing IT services to
India.
 3. Essential Conditions Favoring Globalization

1. Technological Advancements:
Improved communication (Internet, mobile networks).
Cheaper transportation (air, sea cargo).
2. Economic Liberalization:
Deregulation and reduced control over business and trade.
Example: India’s 1991 Economic Reforms.
3. Stable Political Environment:
Democracies and open economies attract foreign investors.
4. Development of Financial Markets:
Efficient banking systems and stock markets facilitate global finance.
5. Global Trade Organizations:
Institutions like WTO, IMF, and World Bank promote international trade.
6. Cost Efficiency:
Companies prefer countries with cheap labor and production facilities.
7. Consumer Demand:
Growing middle-class consumers seeking global brands and products.
8. Strategic Alliances and Mergers:
Collaboration between global companies for expansion.
Example: Tata Motors acquiring Jaguar-Land Rover.
Sector Example
Walmart entering India through
Retail
Flipkart partnership
TCS working on global IT projects for
Technology
US and European clients
Foreign universities offering online
Education courses in India (edX, Coursera)
Dominos and Starbucks adapting to
Food Indian tastes
Hyundai producing cars in India for
Automobile global export

Indian generic drug companies

Pharma exporting to the US and Africa
 Challenges to Globalization
Introduction
While globalization has created numerous opportunities, it also brings along several
challenges—both for developed and developing countries. These challenges can be
economic, political, social, cultural, and environmental.
1. Economic Challenges
a. Job Displacement
Many manufacturing and service jobs are outsourced to countries with cheaper labor,
leading to unemployment in developed countries.
Example: U.S. manufacturing jobs lost to countries like China and Mexico due to
outsourcing.
b. Inequality Between Nations
Rich countries and MNCs often benefit more than poor countries, widening the gap.
Example: African countries exporting raw materials but importing expensive finished
goods.
c. Exploitation of Labor
Low wages, poor working conditions, and child labor in developing countries.
Example: Fast fashion brands accused of exploiting labor in Bangladesh and Vietnam.
 2. Political Challenges
a. Loss of Sovereignty
Global institutions (like WTO, IMF) can influence
national policies, reducing a country’s autonomy.
Example: IMF loan conditions requiring
economic restructuring in developing nations.
b. Trade Wars and Protectionism
Countries impose tariffs and barriers to protect
domestic industries.
Example: US-China trade war, where both
countries imposed tariffs on each other’s goods.
 3. Social and Cultural Challenges
a. Cultural Homogenization
Dominance of Western culture can erode local
cultures, traditions, and languages.
Example: Fast food chains like McDonald's and
Hollywood movies influencing youth culture
globally.
b. Brain Drain
Skilled professionals migrate to developed countries
for better opportunities.
Example: Indian doctors, engineers, and IT
professionals migrating to the US, UK, and Canada.
 4. Environmental Challenges
a. Depletion of Natural Resources
Over-exploitation to meet global demand.
Example: Amazon rainforest deforestation for
cattle farming and soy cultivation.
b. Pollution and Climate Change
Increased industrial activities lead to more
carbon emissions and waste.
Example: Shipments and global logistics causing
high carbon footprints; rising global
temperatures.
 Health and Safety Challenges
a. Global Spread of Diseases
Global travel and trade make it easier for
diseases to spread.
Example: COVID-19 pandemic spreading across
borders due to international travel.
b. Unsafe Products Across Borders
Global supply chains may lack standard quality
checks.
Example: Toxic toys or contaminated food
products imported from abroad.
 6. Cybersecurity and Data Privacy

As businesses go global online, there are increased risks

of data theft and cyber-attacks.
Example: Facebook–Cambridge Analytica data privacy
scandal.
Conclusion
While globalization enhances connectivity, trade, and
cultural exchange, it also presents real challenges that
need balanced policies, international cooperation, and
ethical business practices. Responsible globalization
must include inclusivity, sustainability, and fairness for
all nations and people.
 MNCs and TNCs – Meaning
1. Meaning of MNCs (Multinational Corporations)
A Multinational Corporation (MNC) is a company that owns
or controls production and service facilities in more than
one country. MNCs have a home country (headquarters)
and operate in host countries through branches,
subsidiaries, or partnerships.
Key Features:
 Headquarters in one country, operations in others.
 Large-scale operations.
 Advanced technology and R&D.
 Centralized decision-making.
 Aim for global profit maximization.
 Examples of MNCs:

Operations in Other
MNC Name Home Country
Countries

Manufactures in China,
Apple Inc. USA
sells globally

Production units in India,

Toyota Japan
USA, UK, etc.

Operates in over 190

Nestlé Switzerland
countries

Products like Dove, Lipton

Unilever UK/Netherlands
sold worldwide

IT services in USA, UK,

Infosys India
Europe
 Meaning of TNCs (Transnational Corporations)
A Transnational Corporation (TNC) is a type of MNC
that operates beyond national boundaries, but does
not identify with a single home country. TNCs have
decentralized operations and adapt products and
strategies to local markets.
Key Features:
 No single national identity.
 Global vision and strategy.
 Decentralized decision-making.
 Flexible production and marketing based on local
needs.
Feature MNCs TNCs

Clear home No specific home

HQ Location country country
Decision-making Centralized Decentralized/
localized
Often Products
Standardization standardized adapted to local
products markets
Greater
Control of Tightly autonomy to
subsidiaries controlled local branches
TNC Name Nature of Operation

Operates in over 200 countries;

Coca-Cola tailors flavors and packaging to local
markets
South Korean origin but heavily
Samsung invested in R&D and production
globally
Adapts menus (e.g., McAloo Tikki in
McDonald’s India) while maintaining a global
brand
Swedish company with stores
IKEA worldwide, adapting designs and
prices to local tastes
Oil and gas giant with operations
Shell across continents, no fixed
nationality
3. Importance of MNCs and TNCs
 Promote foreign investment and employment.
 Facilitate transfer of technology and skills.
 Encourage competition and innovation.
 Expand global markets and consumer choices.

4. Criticisms of MNCs/TNCs
 Exploitation of labor and resources in developing
countries.
 Influence over domestic policies.
 Environmental degradation.
 Profit repatriation to home countries without
reinvestment.
 Technology Transfer
Meaning of Technology Transfer
• Technology Transfer refers to the process by which
knowledge, technologies, skills, manufacturing
methods, or facilities are transferred from one entity
to another. This can happen between:
 Universities to industries
 Government agencies to private companies
 Developed to developing countries
 Between companies or divisions within an
organization
Key Objectives of Technology Transfer:
• Commercialize innovations
• Improve productivity and efficiency
• Foster economic development
• Spread technological capabilities globally

Definition (UNCTAD):
"Technology Transfer is a broad set of processes covering
the flows of know-how, experience, and equipment for
mitigating and adapting to climate change among different
stakeholders such as governments, private sector entities,
financial institutions, NGOs, and research/education
institutions."
Types of Technology Transfer
• Horizontal Transfer – From one company to another
(usually in the same industry level).
– Example: A mobile phone manufacturer licenses its
patented display technology to another manufacturer.
• Vertical Transfer – From research labs or
universities to industries.
– Example: A new drug developed by a university research
team is licensed to a pharmaceutical company.
• International Transfer – From a developed country
to a developing country.
– Example: Japan transferring high-speed rail technology
to India (e.g., Mumbai-Ahmedabad bullet train project).
 Issues in Technology Transfer
Despite the benefits, several challenges and
issues can affect successful technology transfer:
1. Intellectual Property Rights (IPR) Issues
• Ownership disputes, patent protection,
licensing costs.
• Example: A local firm in a developing country
may not afford to license patented technology
from a Western country.
2. Lack of Absorptive Capacity
The recipient may not have the skilled workforce or infrastructure to adopt
and use the technology effectively.
Example: Transferring advanced medical equipment to a hospital without
trained technicians.

3. Incompatibility of Technology
Technology developed in one context (e.g., developed country) may not suit
the environmental, cultural, or economic conditions of the recipient.
Example: Water purification systems designed for urban areas may not work
well in rural areas with different contaminants.

4. High Cost of Technology

Advanced technologies can be prohibitively expensive for small firms or
developing countries.
Example: Renewable energy tech like solar panels may require high initial
investment.
5. Lack of Clear Policy and Legal Framework
• Absence of laws or unclear government policies may hinder tech
transfer.
• Example: Inconsistent foreign investment laws can scare off
technology providers.

6. Resistance to Change
• Cultural or organizational resistance can limit adoption.
• Example: Traditional farmers may resist using genetically modified
seeds due to distrust or lack of knowledge.

7. Political and Economic Barriers

• Sanctions, trade barriers, or unstable political climates can affect
international technology transfer.
• Example: Restrictions on exporting semiconductor technology due
to geopolitical tensions.
Real-world Examples of Technology Transfer

Example Description

Transfer of high-yield seed varieties

and irrigation technologies from the
Green Revolution (1960s-70s) U.S. to India, boosting food
production.
Technologies developed for particle
physics (e.g., World Wide Web, MRI
CERN to Industry
advancements) have been transferred
to public sectors.

Oxford-AstraZeneca allowed low-cost

COVID-19 Vaccine Tech licensing to manufacturers like Serum
Institute of India.